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What Should Restaurant Owners Know About Liability?

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Restaurants are places for food, fun, and relaxation, but sometimes the experience doesn’t turn out that way. A restaurant might be legally responsible for many customer mishaps, even if the incident wasn’t technically the business’s fault. 

Here’s everything restaurant owners need to know about liability.

What Legal Issues Can Arise in a Restaurant?

Successful restaurants serve hundreds of people every day, so there’s bound to be a few unsavory situations now and then. First, let’s go over some common scenarios where a restaurant might be held responsible for someone’s illness or injury.

  1. Contaminated Food

The most common instance of restaurant liability is contaminated food. If a customer gets food poisoning or another illness from the restaurant’s food, they have cause to take legal action. Other instances, such as allergic reactions and choking, are not cause for legal liability as long as the restaurant has proper emergency procedures in place.

  1. Alcohol-Related Issues

Alcohol is a blessing and a curse for the hospitality industry. Adult beverages make up between 20 and 25% of an average restaurant’s total revenue. However, it can also lead to some unpleasant situations.

An employee might be drinking on the job and make a costly mistake that harms a customer. Bartenders could over-serve someone and cause alcohol poisoning or lead the intoxicated patron to commit a crime. The restaurant is often to blame in these cases.

That’s why liquor licenses are difficult to obtain for startups. A restaurant must demonstrate competence with alcohol before serving a single bottle.

  1. Employee-Customer Altercations

Physical altercations between employees and customers are tricky situations. Any injuries resulting from the fight could fall on the restaurant’s shoulders. A disgruntled employee could also take legal action if they believe the management team’s negligence allowed the assault to happen.

Fights at restaurants seem to happen more often than usual these days, so owners must pay extra close attention to the interactions between their staff and patrons.

  1. Injuries Caused by Property Damage

Injuries caused by poor property management and general negligence are a restaurant owner’s worst nightmare. These instances are 100% preventable and thus 100% the establishment’s fault. Along with paying to fix the property damage, you also have to make a legal settlement with the victim(s). In extreme cases, the restaurant might even have to close down.

Injury or property damage claims can get even more complicated if the employee is a minor or the accident occurs in a company vehicle.

  1. Loss of Information

In today’s digital world, online information gets stolen all the time. A cybercriminal can breach a company’s data and find customers’ credit card numbers, among other useful information. Paying to recover this information leads to lost revenue. Additionally, an angry customer might blame the restaurant for the data breach and take legal action.

Types of Insurance Every Restaurant Needs

The above incidents might seem unlikely now, but they become more probable as a restaurant grows and takes on more risk. To protect a restaurant’s assets and ensure its continued growth, owners must get many types of insurance.

  1. General Liability

General liability is arguably one of the most crucial insurance policies of all, covering the legal costs and settlements from injuries and property damage. Certain policies may also cover the costs of foodborne illnesses, copyright infringement lawsuits, damaged reputations, and many other problems that arise from the aftermath of a workplace mishap.

  1. Liquor Liability

This type of insurance protects restaurants from any harm that an intoxicated customer might cause to themselves, other people, or the building. It’s especially important for bars, wineries, breweries, and other drinking establishments that rely on alcohol as their main source of revenue.

  1. Auto Liability

If a restaurant has a delivery or catering service with company vehicles, they need auto liability insurance to protect their assets in case of an accident. These tragedies often have expensive medical, legal, and mechanical costs.

  1. Cyber Liability

Cyber liability covers any costs related to online data breaches. These costs can reach up to $25,000 for a single cyberattack. Cyberattacks also cost precious downtime, which many businesses do not consider. General liability might not cover these costs because cyberattacks are relatively new and unique to other legal issues.

  1. Commercial Property Insurance

Property insurance covers the restaurant’s physical assets, from kitchen appliances to furniture. However, most generic property insurance policies only cover human-caused damages. You need to make sure your insurance provider accounts for natural disasters, especially if you live in a high-risk area where extreme weather is common.

  1. Worker’s Compensation

Worker’s compensation is one of the few insurance policies that businesses are required to purchase. It protects employees from expenses related to work illnesses or injuries. Fast-food restaurants are the most prone to workplace injuries due to young, inexperienced staff and a hectic work environment.

  1. Business Interruption

Restaurants might have to temporarily close for many reasons – like extreme weather events, pest infestations, vandalism, damaged equipment, and more. COVID-19 is a prime example. Business interruption insurance helps businesses stay afloat during these difficult times.

  1. Food Contamination

Food contamination insurance has one simple purpose – to help eateries recover from the costs associated with spoiled food. Power outages are the most common cause of food contamination, but a bacterial infestation is also possible.

Protect Your Restaurant’s Assets

Restaurants are supposed to be safe places to enjoy a well-cooked meal, but sometimes the experience takes a bad turn. Don’t let these negative situations cost you your business. Liability issues have shut down many eating establishments in the past. Protect your restaurant’s assets and reputation with multiple insurance policies.

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